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VW's Winterkorn tells 20,000 staffers of big cost-cutting plans

During a gathering of 20,000 Volkswagen Group employees at company headquarters in Wolfsburg, Germany on Wednesday, CEO Martin Winterkorn dropped a bombshell. The boss stated that the automaker isn't operating efficiently enough and admitted the company needs to radically start cutting back to raise its profit margins. To right the ship, Winterkorn has proposed killing off less profitable models and spending less on research and development.

However, Winterkorn can't make these decisions unilaterally. Volkswagen's works council also has a seat on the supervisory board to represent laborers, and it isn't likely to take the proposed cuts sitting down.

Winterkorn's plan is especially interesting because the Volkswagen Group is going gangbusters worldwide, even if it's not meeting expectations here in North America. In the first quarter, it posted the equivalent of over $3 billion in global profits after taxes, and the group is aiming to meet its 10-million vehicle sales goal in 2014, four years early. Contrast that to the problems of the VW brand that saw its Q1 operating profits fall to around 440 million euro ($592 million), compared to about 590 million euro ($794 million) in the same quarter for the previous year. At the time, the automaker attributed the lower figure to falling sales, like in North and South America, poor exchange rates and higher investments in technology.